The hidden value behind capital structure decisions

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

Return on equity: A comparison between companies in Portugal and Brazil: Similarities and differences

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

Urban deforestation and urban development

This paper has developed a model of a single forest owner operating with perfect foresight in a dynamic open-city environment that allows for switching between alternative competing land uses (forest and urban use) at some point in the future. The model also incorporates external values of an even-aged standing forest in addition to the value of timber when it is harvested. Timber is exploited based on a multiple rotation model a la Faustmann with clear-cut harvesting. In contrast to previous models, our alternative land use to forest land is endogenous. Within this framework, we study the problem of the private owner as well as that of the social planner, when choosing the time to harvest, the time to convert land and the intensity of development. We also examine the extent to which the two-way linkage between urban development and forest management practices (timber production and provision of forest amenities) contributes to economic efficiency and improvements in non-market forest benefits. Finally, we consider policy options available to a regulator seeking to achieve improvements in efficiency including anti-sprawl policies (impact fees and density controls) and forest policies such a yield tax. Numerical simulations illustrate our analytical results.

Adjusting to external imbalances within the EMU, the case of Portugal

From 1995 to 2010 Portugal has accumulated a negative international asset position of 110 percent of GDP. In a developed and aging economy the number is astonishing and any argument to consider it sustainable must rely on extremely favorable forecasts on growth. Portuguese policy options are reduced in number: no autonomous monetary policy, no currency to devaluate, and limited discretion in changing fiscal deficits and government debt. To start the necessary deleveraging a remaining possible policy is a budget-neutral change of the tax structure that increases private saving and net exports. An increase in the VAT and a decrease in the employer’s social security contribution tax can achieve the desired outcome in the short run if they are complemented with wage moderation. To obtain a substantial improvement in competitiveness and a large decrease in consumption, the changes in the tax rates have to be large. While a precise quantitative assessment is difficult, the initial increase in the effective VAT rate needed to allow the social security tax to decrease by 16 percentage points (pp) is approximately 10 pp. Such a large increase in the effective VAT rate could be obtained by raising most of the reduced VAT rates to the new general VAT rate of 23 percent. The empirical analysis shows that over time the suggested tax swap could generate surpluses and improve the trade balance. A temporary version of the suggested tax-swap has the attractiveness to achieve a sharper increase in the private saving rate maintaining the short run gains in competitiveness. Finally, the temporary version of the fiscal devaluation could be the basis for an automatic stabilizer to external imbalances within a monetary union.Portugal has been running large current account deficits every year since 1995. These deficits have accumulated to an astonishing 110 percent of GDP negative external asset position. The sustainability of such a large external position is questionable and must rely on fantastic productivity growth expectations. The recent global financial crisis appears to have anticipated the international investors reality check on those future expectations with the result of a large increase in the cost of external financing. Today the rebalancing of the current account through an increase in national savings and an improvement in competitiveness must be at the top of the Portuguese authorities “to do” list as the cost of a pull out from international investors is of the order of 10% of GDP. The external rebalancing is difficult as the degrees of freedom of the Portuguese authorities are limited in number: they have no autonomous monetary policy, no currency to devaluate, and little discretion in fiscal policy as deficit limits and debt targets are set by the Stability Growth Pact and the postcrisis consensus on medium-term fiscal consolidation. One possibility that remains is to change the fiscal policy mix for a given budget deficit. The purpose of this paper is to explore the effects of a “fiscal devaluation”1 obtained through a tax swap between employers’ social security contributions and taxes on consumption2. The paper begins by illustrating Portugal’s current account evolution during the euro period. The second section section lays out a model to offer a qualitative assessment of the dynamic outcomes of the the tax swap. I show that the suggested tax swap can in theory achieve the desired outcomes in terms of competitiveness and consumption if complemented with moderation (stickiness) in wages. I also study the effects of a temporary version of the tax swap and show that it achieves a sharper improvement in the current account that accelerate the rebalancing. The third section moves to the empirical analysis and estimates the likely effects of the tax swap for the Portuguese economy. The fourth section concludes.

Macroeconomic impacts of politics and policy: Applications to financial and real markets

A PhD Dissertation, presented as part of the requirements for the Degree of Doctor of Philosophy from the NOVA - School of Business and Economics

Inefficient commuting in a city with spillovers

A Masters Thesis, presented as part of the requirements for the award of a Research Masters Degree in Economics from NOVA – School of Business and Economics

Land cover mapping analysis and urban growth modeling using remote sensing techniques

The rapid growth of big cities has been noticed since 1950s when the majority of world population turned to live in urban areas rather than villages, seeking better job opportunities and higher quality of services and lifestyle circumstances. This demographic transition from rural to urban is expected to have a continuous increase. Governments, especially in less developed countries, are going to face more challenges in different sectors, raising the essence of understanding the spatial pattern of the growth for an effective urban planning. The study aimed to detect, analyse and model the urban growth in Greater Cairo Region (GCR) as one of the fast growing mega cities in the world using remote sensing data. Knowing the current and estimated urbanization situation in GCR will help decision makers in Egypt to adjust their plans and develop new ones. These plans should focus on resources reallocation to overcome the problems arising in the future and to achieve a sustainable development of urban areas, especially after the high percentage of illegal settlements which took place in the last decades. The study focused on a period of 30 years; from 1984 to 2014, and the major transitions to urban were modelled to predict the future scenarios in 2025. Three satellite images of different time stamps (1984, 2003 and 2014) were classified using Support Vector Machines (SVM) classifier, then the land cover changes were detected by applying a high level mapping technique. Later the results were analyzed for higher accurate estimations of the urban growth in the future in 2025 using Land Change Modeler (LCM) embedded in IDRISI software. Moreover, the spatial and temporal urban growth patterns were analyzed using statistical metrics developed in FRAGSTATS software. The study resulted in an overall classification accuracy of 96%, 97.3% and 96.3% for 1984, 2003 and 2014’s map, respectively. Between 1984 and 2003, 19 179 hectares of vegetation and 21 417 hectares of desert changed to urban, while from 2003 to 2014, the transitions to urban from both land cover classes were found to be 16 486 and 31 045 hectares, respectively. The model results indicated that 14% of the vegetation and 4% of the desert in 2014 will turn into urban in 2025, representing 16 512 and 24 687 hectares, respectively.

Corruption: Who pays for the bill?

This paper intends to study who pays for corruption in Brazil from 2005 to 2011. Politicians may decide to charge the spillovers of corruption at a municipal level through taxes or to charge it to the entire country through voluntary transfers. The used measure of corruption is based on audit reports conducted on randomly selected municipalities from 2005 to 2011.In order to address this question an IV strategy was computed using as instrument for the number of observed cases of corruption the dummy variable of being audited or not. We evaluated the impact of corruption on taxes and on voluntary transfers and concluded that with an increase in the number of observed cases of corruption the first decreases and the latest registers an increase. Therefore, considering all Brazilian municipalities, mayors prefer to spread the bill all over the country than charging it locally.

Essay on secular stagnation

In this paper we show that a closed economy, with a balanced budget and unable to increase public spending, can avoid or leave a persistent slump through adequate and timely combination of monetary and fiscal policy based on distortionary taxation. We use a three generations OLG New Keynesian model in which a permanent slump is possible without any self-correcting force to full-employment. Complementing recent work on Secular Stagnation using lump-sum taxation and government spending as fiscal instruments, our contribution is to use distortionary taxes over labor, consumption and capital, in a balanced budget environment with constant (or decreasing) government spending.

Comprehensive income: evidence from Portuguese listed companies on reporting choices and value relevance

This work project aims at analysing choices related to Comprehensive income (CI) of Portuguese listed firms and understanding the reasons behind them. Additionally, it studies the relevance of CI versus Net Income (NI). It was found that firm’s size and volume of Other comprehensive income (OCI) are positively related with the choice for separate statements while smaller firms with positive NI and negative OCI tend to disclose less information about taxes. The value relevance of CI proved to be superior to that of NI but OCI seems to have no incremental value relevance.

The system of Transfer Pricing in a multinational

Transfer prices are used by the majority of firms worldwide when intermediate products or services are transferred within the same organization. These prices are reported as revenue for the selling entity (division, unit, department etc.) and as cost for the buying entity. Nevertheless, transfer prices lead to many disputes among managers in the same organization as transfer prices influence the performance of their entities. In cross-border transactions, transfer prices can be used by firms to reduce corporate taxes and thus, increase total firm profits. In order to fight against this firms’ practice, tax authorities require firms to establish a transfer pricing system in accordance with OECD1 Transfer Pricing Guidelines.

Return on equity: A comparison between companies in Portugal and Brazil: Similarities and differences

The purpose of this research is to study the Return on Equity of Portuguese and Brazilian companies, through the DuPont method. This project analyses whether differences in the ratios depend on specific features of the country, or if it is influenced by the industry where it is located. From the comparisons it is concluded that Brazilian companies pay higher corporate taxes and while the Portuguese companies are more leveraged, it is the Brazilian companies which pay higher interests. It is also noticeable that Portuguese companies take more advantage from the financing decisions and Brazilian on the investing decisions.

Do jogo de fortuna ou azar

Currently, gambling doesn’t have a strong social disapproval. However, the phenomenon of gambling raises several issues related to property protection, compulsive gambling, the youngest personality development, the State taxes and social development measures, which some authors believe to be the protected legal interest in the criminalization of illegal gambling exploitation. However, the authorization system, and because several of those interests, constitutionally protected, are also violated in the authorized gambling places, it appears that the legislator intended to define the legal interest as the order and public tranquility. The purpose of this study is to understand what is protected with the illegal gambling exploitation. This will involve defining the concept of exploitation and the concept of gambling. Still, we will try to know if there are situations without ethical and social resonance and what their consequences.

On the labor share the long-run equilibrium and its adjustment process

This research computes an Equilibrium Labor Share using a VECM for a panel of 19 countries, analyzes what determines the speed at which the labor share adjusts towards that equilibrium and decomposes this adjustment in terms of real wages and employment. Results suggest that the speed at which a country adjusts decreases with employment protection legislation and labor taxes. Most countries’ labor shares adjustment is made through real wages changes instead of changing employment, suggesting that wage moderation policies may play an important role on the adjustment process without harming employment. Keywords: Equilibrium

On the labor share the long-run equilibrium and its adjustment process

This research computes an Equilibrium Labor Share using a VECM for a panel of 19 countries, analyzes what determines the speed at which the labor share adjusts towards that equilibrium and decomposes this adjustment in terms of real wages and employment. Results suggest that the speed at which a country adjusts decreases with employment protection legislation and labor taxes. Most countries’ labor shares adjustment is made through real wages changes instead of changing employment, suggesting that wage moderation policies may play an important role on the adjustment process without harming employment.